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Life annuity: “They have an age, a statistical life expectancy”, when a buyer is more interested in mathematics than in the health of the sellers
Life annuity: “They have an age, a statistical life expectancy”, when a buyer is more interested in mathematics than in the health of the sellers
(Special correspondent / France 2)
Small pensions, soaring real estate… Life annuity sales are attracting more and more French people, who see it as a way to stay living at home thanks to a monthly annuity paid by the buyer. But how does life annuity work? “Special Envoy” looks at this somewhat complex device.
For the buyer, the price of a life annuity property is broken down into two parts: on the one hand a monthly annuity, and on the other a cash sum, called the “bouquet”. The larger this bouquet, the less the monthly pension will be. The life annuity appeals to rather wealthy buyers: the bouquet is paid in cash, it is not possible to borrow.
Pascal Larbier, 52, is a business manager. This boss of an IT company is banking on life annuity to increase his assets. Since 2017, he has already purchased four properties this way. In this extract from “Special Envoy”, with a real estate agent, he studies the possibility of a fifth purchase. This is an apartment for which he would pay a bouquet of 140,000 euros. The monthly rent requested is 992 euros, to which must be added the charges for the apartment, i.e. “1,220 euros to be taken out every month“. But for how long? How can we estimate the theoretical duration of the period during which he will pay this annuity?
The Daubry scale, a calculation based on statistical life expectancy
To calculate this duration, there is a scale, the Daubry scale. It is based on life expectancy data provided by insurance companies and INSEE. For an 81-year-old woman and a 78-year-old man, as is the case of the seller couple, the table indicates a life expectancy of 13.2 years. “In theory, statistically, the last surviving member of the couple will live for another thirteen years“, explains the real estate agent.
With the moral problem that it can pose, because it depends on the lifespan of the sellers, the life annuity sale still suffers from a bad image. But this mathematical calculation eases the conscience of the potential buyer: “Imagine that during a visit, I start to be interested in the state of health of the people I have in front of me… it would become something super unhealthy! I am only interested in mathematics: they have an age, a statistical life expectancy, and we stop there!“, reassures Pascal Larbier.
Excerpt from “Life annuity, the good deal?”, a report to review in “Special Envoy” on May 2, 2024.
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